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Trading Signals

The Bar Charts

By Raul Canessa C.

Bar charts- A useful market analysis tool

The Bar charts are one of the various types of prices charts used to analize the market movements. The bar charts, unlike the line charts, shows the movement of prices for a specific period of time (can be 1 minute, 5 minutes, 1 hour, 1 day, 1 week, etc), besides the opening price, closing price, maximum price and minimum price. The bar is represented by a vertical line and two perpendicular horizontal lines. The high point in the bar is the maximum price achieved in the period while the low point is the minimum price in the same period. The two horizontal lines are arranged one to the right and the other to the left. The left side line represents the opening price and the right side line is the closing price.The information represented in the bar charts is more complex than that presented in line graphs, but is also more complete.

There are two types of bar charts used in Forex and other markets, and differ slightly from the information presented. One is called LHC(initials Low, High, Close) chart and the other OLHC(initials of Open, Low, High, Close) chart, and they look very similar in the graph but in fact there are some differences between them. These charts show bars with information on price movements of a currency pair in a given period. For example, if we choose to see a OLHC chart of the EUR /USD of 15 minutes, each bar shows information about what has happened in separated periods of 15 minutes in the Forex Market. Let's see how it would look on the platform:

Click to enlage

*Note that in any bar chart, each bar has the same period of time. If we analyze the previous chart for the EUR/USD, each bar has a 15 minutes period.

In the OLHC chart, for example, each bar shows the Open (opening price), the Low (lowest price), the High (highest price) and the Close (closing price) in a specific period of time. This information allows the trader to have a complete picture of price action.

Therefore, the main difference between a OLHC chart and a LHC chart is, as their names suggests, that the LHC chart does not shows the opening price for the period in the bar. However, we can see this price because it is the same as the closing price of the previous bar. Which is better? It depends on what it is more comfortable for the trader to use.

Anyway, this type of chart is not very popular today, because the Japanese candlestick charts show the same information, but at the same time are much easier to use. For this reason most traders in every market are using Japanese Candlestick charts because this tool allows to observe more easily market formations and trading patterns. However, if you want to use this type of graph because it is more comfortable for you, a lot of trading plataforms like Metatrader 4 include bar charts among their analysis tools.